Landlord’s Compulsory Redress Schemes

New legislation has been introduced which means that from 1 October 2014 it is a legal requirement for lettings agents and property managers in England to join 1 of 3 government approved redress schemes.

On 1 October 2014 legislation came into force making it a requirement for all lettings agents and property managers in England to belong to a Government approved redress scheme. These schemes provide a mechanism for complaints to be investigated and determined by an independent person.

The purpose of these schemes is to deal with complaints made by tenants or landlords about agents. Essentially these are Ombudsman Schemes. Tenants, including prospective tenants can complain to a scheme. Most landlords (not just smaller consumer or 'accidental landlords') can now also access the three schemes if they wish to complain about lettings and managing agents that are members of any of these redress schemes.

For the purposes of the legislation the government has approved three redress schemes. They are:

If a complaint is found proven then schemes have a number of options:-

Require an apology

Issue a reprimand

Order compensation

Fine a member

Expel a member

As regards compensation, the amounts payable are capped at £25,000 and if an aggrieved party wishes to claim more they have to proceed via the Courts; rather than the Ombudsman Scheme. Members of the Scheme are bound by the Scheme decision but complainants do not have to accept the decision. They can go to Court instead if they are not happy with the outcome.

In considering a Policy approach in this area Councils have regard to two sources of guidance and information. The first being Annex C of the Department for Communities and Local Government (DCLG) “Improving the Private Rented Sector and Tackling Bad Practice – A Guide for Local Authorities’. Secondly to an industry standard brought together by the National Approved Letting Scheme (NALS) that encompasses partnership working with a number of key Local Authorities across England.

Failure to join a redress scheme

Any agent or property manager who is found not to be a member of one of the three recognised scheme will face the sanction of a financial penalty the level of which (up to a maximum of £5000) will be determined by the Council.

The process

The process followed by the council will involve the service of a ‘notice of intent’ followed if necessary by a Penalty Charge Notice (PCN). A reasonable length of time (at least 28 days) is provided for the agent or property manager to join one of the recognised schemes.

The level of fine

DCLG guidance (referred to above) directs that £5000 should be considered the normal level of fine to be imposed with consideration to a lower fine only to be considered if it is confident that extenuating circumstances exist. As such the level of fine imposed will be £5000.

(NB - If any extenuating circumstances are submitted to the Council, due to their varying nature, they will be considered on a case by case basis)

Right of Appeal

Anyone served with a PCN has the right of appeal to the First-Tier Tribunal.

In the event of an appeal, the PCN is suspended until the appeal has been determined or withdrawn. The Tribunal has the power to quash, confirm or vary the Final Notice.

Recovery of financial penalty

If there is no appeal, or the notice is upheld on appeal and the agent fails to pay the penalty in full, the Council will take all necessary steps to recover the penalty.

If circumstances dictate, this will be carried out on the order of a court as if payable under a court order.